Xu Chenyu: Good product quality and knight service make stainless section steel factories’ survival and development

Asian Metal: Good afternoon, Mr. Xu, thank you for accepting the interview. Could you please give us a more detailed introduction of your products?

Xu: Ok. Our main products are stainless steel wire, bright wire, welding wire, bright bars and black bars, with specifications of 304, 316, 310S and the annual production capacity is about 9,000 tons. Well, stainless steel wire is mainly supplied to domestic anchor chain manufacturers who export anchor chains to Europe. A small part of the stainless steel wire, such as spraying wire, welding wire and cable wire are supplied to customers in East China, like Jiangsu, Zhejiang and Shanghai.

Asian Metal: So, it seems that you do more domestic trade rather than export, right?

Xu: Yes. About 70% of our products are sold to the domestic market and only a small part is exported by our clients.

Asian Metal: Then, could you talk something about the current domestic stainless steel market?

Xu: It is obvious that the market is quite bad, and it has been sluggish for more than one year with prices decreasing continuously. Besides the oversupply, the other important reason is that producers do not improve their products’ quality and only compete on price. Especially in the low-end product market, most producers and traders dealing with stainless steel 201 series and 304 series under standard promote sales by reducing prices, so the market is getting worse and worse in a vicious circle.

Asian Metal: Yes. Most traders complain that they could not make profits, so how about producers? Are they also suffering from that?

Xu: It is true that stainless steel traders are having a hard time. For one thing, there are too many suppliers in the market and they are all competing on price, so how could they make profits? For another, more and more producers are involving in E-commerce, bringing great impact on steel traders. Producers communicate with buyers on internet and invite the latter to visit their factories. It is much easier to close deals with a firm entity. In addition, producers also pay more attention to providing good after-sales service to clients, so buyers prefer to purchase from mills directly rather than from traders.

Well, high-end stainless steel mills’ living situation is much better, as long as they have low debt and stable demand from clients. The high-end product means those meeting national or international standards. For example, our company’s products are all with good quality, and most buyers are satisfied with them. Consequently, they could accept a higher price and our profits are higher. For example, although the price of stainless steel from Rongming Company is RMB3,000/t higher than those from most other stainless bar mills, it is the fixed supplier of China Southern Locomotive Group, just because its products’ quality could meet the client’s requirements.

Asian Metal: Price of the raw material - nickel rebounded greatly in past two weeks and prices of stainless steel also show an upward trend now, so how do you think about this?

Xu: I think it is normal for the nickel price went up because it declined too much in past several months, and about the price of stainless section steel, I believe it has touched the bottom line, and it will increase in following two or three months. Most stainless section steel mills kept low stocks or had no stocks in past several months as the market was quite sluggish. Currently, my company’s finished stainless steel stock is only 700t, which could not be lower, as the regular level should be 2,600t. Thus, we are planning to purchase more raw material - stainless scrap to produce section steel. However, most stainless scrap traders do not hold large stocks either, which is helpful for the stainless steel price increasing, but I am not sure how much it will go up. Honestly, most mills hope the price would increase slowly and steadily, because it is healthy for the development of the whole market.

Asian Metal: Right. Then the last question, could you give some advices to other stainless steel producers for their development in the hard time? And what’s your plan for the near future?

Xu: Good question. Well, one company’s viability could be reflected more thoroughly in the hard time. Why some mills could run excellently while some others go bankrupt? In my opinion, there are three points: the debt rate, the operation principle and the products’ quality.

All steel mills have debts, but it is important to control it at a safe level. My company’s debt now is only RMB7 million, which is rather low compared with many other mills’, so it is unnecessary for us to worry about the capital flow.

My boss has an insightful understanding about the operation principle. He always tells us that a company has face as a person does, which means it is important for a company to be in good faith and it should fulfill its promises to customers, even if it will burden losses in the trading. One company could give up profits in the hard time but could not give up its principle of supplying good-quality products and good after-sale service.

Under the guidance of such a management idea, we have different ways in the negotiation with clients. We emphasize more on products’ quality rather than cut prices. Only when buyers recognize the better quality, they can accept a higher price, and thus steel mills could make profits and survive. Then they provide more good-quality products and attract more buyers, which is a virtuous circle. Consequently, steel mills will develop healthily and rapidly, just like Asian Metal.

Asian Metal: Yes, thank you so much for your excellent sharing and wish your company a better future!

Xu: The same to Asian Metal!